Ryan’s deficit elimination plan shows that the Republican still haven’t figured out how to square the circle on Social Security privatization.

Everyone seems to like Rep. Paul Ryan. The gangly Wisconsin Republican comes off as so earnest and public-spirited that hardened Washington pros lean over hard to think the best of him. Free-market doctrinaires love Ryan because his ideas are a supply-side fantasy come to life. Even Ezra Klein, the Washington Post’s most liberal columnist, who can be pretty fierce sometimes, calls him “a genuinely nice guy.”

But that’s what makes it so interesting: especially his proposal to privatize Social Security, which would slash benefits and use the savings to fund private investment accounts. The idea is decades old now, and it still suffers from the same fatal flaw as when the Cato Institute first proposed it in 1980.

In a word, he can’t pay for it.

According to an analysis by the chief actuary of the Social Security Administration, Ryan’s privatization scheme falls $4.9 trillion short of paying for itself. That’s because so much money would be diverted from payroll taxes that even with beneficiaries suffering benefits cuts averaging 16% cut over the first 40 years of Ryan’s “reform” and 28% over 70 years, the program wouldn’t have enough left in the till to pay them.

That’s $4.9 trillion in new taxes Washington would have to collect or or new debt it would have to sell to the public – that is, to the Bank of China, the Bank of Japan, and America’s other creditors.

Then there’s the human cost. Over a third of elderly Americans on Social Security have no other income but their monthly check from the SSA. More than half rely on Social Security for the majority of their income. A 16% cut in Social Security benefits for these people would be huge. A 28% cut would be devastating. America’s elderly are already less well provided for than their counterparts in almost every other developed country. The Ryan plan would make matters much worse.

Privatization advocates have never understood this. And ironically, given the fact that they like to call themselves budget-balancers, they’ve never been able to come up with a plan that’s any better than Ryan’s at paying for itself.

A proposal to carve Personal Savings Accounts, floated by the presidential Advisory Council on Social Security in 1996, would have applied a 1.52% “supplementary” over and above the payroll tax on workers for the next 75 years. The government would also have had to issue $1.9 trillion of new government bonds, ironically dubbed “Liberty Bonds.”

George W. Bush’s 2001 Commission to Strengthen Social Security, also proposed proposed carving out private accounts, but didn’t feel obliged to come up with a scheme to pay for them. Instead, it left it up to Congress to figure out how to close a 10-year, $1 trillion shortfall from diverting payroll taxes into those accounts. “This is the mother of all magic asterisks,” Peter Orszag, then of the Brookings Institute, said at the time.

Some members of the commission came up with a convoluted scheme for Social Security to loan itself the money, but that failed the laugh test.

Earlier, the prominent conservative economist Martin Feldstein concocted an even stranger gambit: Workers would get their private accounts. But once they retired, most of the money in the accounts would be “clawed back” by the government to pay for their basic Social Security benefits. Workers would only be allowed to keep 25% of the fruits of their investment prowess. If there wasn’t enough in the accounts to pay for those basic benefits, the government would promise to make it up. Somehow. Probably by – yes – raising taxes or issuing more debt.

Social Security privatizers have found themselves, over and over, faced with the same dilemma. The program, they claim, is going broke. But their solution would actually make matters worse. Some try to wriggle free by arguing that private investment accounts would turbo-charge the economy to such an extent that the new debt required to make up the shortfall in benefits would be easily paid for. (New taxes are, of course, not to be considered.) And that debt would “only” be needed for the next 75 years. Or so. After that, our brave new Nation of Investors would be home free.

Every time Congress has tried seriously to concoct a Social Security reform based on private accounts – during the second Clinton administration, during Bush’s second term of office – it’s forced to consider Ayn Randian scenarios like this one. And each time, it’s backed away from the bobby trap. Workers getting close to retirement age can only hope their lawmakers retain enough of an instinct for self-preservation to keep doing so.